Print Edition - 2017-03-21 | MONEY
Germany’s ‘wise men’ reject trade surplus charge
Mar 21, 2017-
Germany’s panel of economic experts on Monday rejected criticism that Europe’s biggest economy is running an overly high trade surplus, but said Berlin could reduce the gap by attracting more investors.
US President Donald Trump’s administration has lashed out at Germany over its surplus, as data showed that Berlin exported 253 billion euros ($270 billion) more than it imported in 2016.
The current account surplus, which also includes services, was even higher at 266 billion euros.
Trump’s top trade advisor Peter Navarro has accused Germany of exploiting a “grossly undervalued” euro to boost its exports.
But in its report to Chancellor Angela Merkel, the German Council of Economic Experts said: “The recent growing criticism against the high German current account surplus ... is not substantive.”
“The German current account surplus is high, but there are no macroeconomic imbalances,” said Christoph Schmidt, the chairman of the council known as Germany’s “five wise men” even though it includes a woman among them.
But politicians need to ask themselves “why are German companies investing a lot comparatively abroad, and not domestically,” he said.
“The government should improve the attractiveness of Germany to investors and thereby help to reduce this surplus,” added Schmidt.
The panel also predicted that growth this year will hit 1.4 percent, 0.1 percentage points up from its previous forecast, as the employment market remains healthy.
For 2018, output growth is expected to reach 1.6 percent, it said, also pointing to a positive global economic outlook.
But it repeated its criticism of the European Central Bank’s easy-money policy, saying that it is “still too expansive and that there are growing risks for financial market stability”. “The ECB should bring about an end to its stimulus spending programmes as soon as possible,” they added. Under President Mario Draghi, the ECB has bought well over one trillion euros of government and corporate bonds in a bid to pump cash into the financial system.
At its last meeting this month, the ECB decided to keep cheap money flowing for fear of undermining a nascent recovery.
Published: 21-03-2017 10:30